Buying a business involves 7 steps: you create a buyer profile, find and evaluate businesses, determine the value and price, arrange financing, negotiate with the seller, and finalize the deal with a notary. A well-defined buyer profile and a thorough evaluation increase the likelihood that you’ll acquire a business that’s truly the right fit for you.
You've made the decision to take over a business. Then you are on the eve of an exciting adventure and possibly a major boost to your entrepreneurial career.
All successful business acquisitions have one thing in common: the entrepreneur worked systematically toward the acquisition of the business. Thorough preparation and planning provide peace of mind, clarity, and structure.
This step-by-step plan will help you: by carefully going through all the questions and points of attention and listing them clearly for yourself. This will maximize your chances of successfully acquiring a business.
Buying a business is often more interesting than starting a business yourself from scratch. Products, customers, suppliers: it's all already there. It involves less risk and contributes directly to profit, revenue or increased market share. In addition, research shows that of all SME businesses that are taken over, no less than 70% perform better after the takeover than before.
At Brookz , we see that the number of new businesses entering the market remains high. Whereas in the 1990s, an entrepreneur would typically remain with their business for about thirty years, the takeover barometer shows that as of 2024, a quarter of the businesses sold are less than ten years old. The new generation of entrepreneurs no longer plods along with the intention of eventually passing the business on to their children. If they can sell their business at a good price after a few years, they choose to do so. That is a sign of success.
So entrepreneurs are entering the takeover market earlier with their businesses, and this trend will only continue in the coming years. Add to that increased financeability, undiminished interest from potential buyers and hungry investment companies crowding each other: then 2026 must be a good takeover year!
What are the most important steps in buying a business?
- Creating a buyer profile
- Finding businesses
- Evaluating businesses.
- Determine value and price
- Arranging funding
- Negotiate
- Complete the deal
1. Establish a buyer profile.
You want to acquire a business, but where do you start? Quite simply, everything starts with creating a comprehensive buyer profile.
Not sure yet what kind of business you want to buy? No worries. Most entrepreneurs who begin their search usually have no idea either. So start by creating a comprehensive buyer profile that gives you the necessary focus.
Answering the following questions will already give you a more concrete picture:
- What sector or industry are you looking for a business in?
- What type of business are you looking for: manufacturing, service or trading business?
- What size should the business be in terms of revenue and number of employees?
- In which region of the Netherlands should the business preferably be located?
- What (growth) phase is the business in: rapid growth, cash cow, or turnaround?
- How much (financial) risk are you willing to take?
- In what time frame would you like to acquire a business?
- Do you want a 100% takeover or a (partial) interest?
Next, it’s important to rank the answers to these questions based on what matters most to you. Once you’ve prioritized all your search criteria this way, the search process becomes much clearer. That way, as you search online, you’ll quickly know which listings are worth responding to—and which aren’t.
Another important advantage of a sharp buyer profile is that you will also be taken much more seriously by potential sellers and acquisition advisors. After all, if you yourself cannot make clear what you are looking for, sellers will have little incentive to exchange extensive information with you about their businesses.
2. Finding businesses.
You know what kind of business you’re looking for, but where should you start your search? There are plenty of options, and the good news is: you can start your search online right away.
Where can you find a business to acquire?
Anyone looking for a house will find virtually the entire supply on the Internet. But as transparent as the housing market is, the acquisition market for businesses is opaque. It is therefore important to be close to the fire and tap into the right contacts. There are a number of sources of information to help you track down a business of interest:
- Own (entrepreneurial) network
- Events, industry and entrepreneur meetings
- Online platforms such as Brookz (post buyer profile)
- Acquisition advisors
- Banks, accountants, lawyers, etc.
- Cold acquisition (calling and/or emailing)
It is important to set your buyer profile as broadly as possible and thus build a list (longlist) of interesting businesses. After all, you'll need to take a good look at 30 to 50 businesses before you arrive at a shortlist of 2-3 concrete acquisition candidates.
Also remember that in SMEs a business often has to be awarded to you, because there are usually several buyers for the same business and the price is not always decisive for the seller. Therefore, it is good to always put yourself in the seller's shoes: why does he want to sell a business, what is important to him and how can you respond to this?
3. Evaluate businesses.
You can largely do the non-financial analysis of a business yourself. In fact, you should do it yourself, because you need to know exactly what you are buying.
Now that you have a business in your sights, you are going to investigate whether the business is indeed what you are looking for. When you contact the seller, if there is mutual interest you will receive the information memorandum, which contains a lot of data about the business. Below are some important points to pay extra attention to.
Owner Dependency
One of the most important questions you need to answer is: How crucial is the owner to the business’s success? Does everything revolve around him or her, or has he or she assembled a management team capable of operating independently?
The Secret to the Business
A successful business does something better than the competition. That could be anything: price, quality, or a strong brand. Try to figure out what makes the business unique, where the opportunities for growth lie, and what risks threaten the business.
Market and competition
Does the business operate in a growing, stable or declining market? How is the market divided: are there a few large players or many small ones? Is the market local, national or international? And what future developments - think legislation and technology - affect the industry?
Products and services
How valuable and indispensable are the business's products, what is the added value? How is the business model structured? What opportunities did the previous owner miss and what can you add yourself to achieve growth?
Staff
Look critically at your future employees. What is the make-up of the workforce? Which employees are crucial to the business's success? And will they stay even after an acquisition?
Customers and Suppliers
You’d rather not buy a business that depends on just a few customers. What about the diversity of its customer base? And the fewer suppliers a business has, the greater the risks. Don’t just look into how many suppliers the business has, but also examine their financial health and whether the agreements are properly documented.
Hiring an adviser?
You can do a lot yourself when taking over a business, but especially when it comes to financial analysis and tax/legal aspects, you usually still need an adviser. Brookz s Advisor Search Engine makes it quick and easy to find the right adviser.
4. Determine value and price
After the financial and non-financial analyses, you need to start determining what the business is worth in your eyes. And thus what you are willing to pay (at most) for it.
The value of a business is the result of a calculation. The past plays only a limited role in this. Put simply, the value of a business is primarily determined by what you expect to earn from that business in the future. This is weighed against your investment and an assessment of the risks you expect to face.
As a buyer, you look at at least 3 aspects for this:
- Gross profit: how much profit does the business make? Often the average of the past 3 years is considered.
- Revenue composition: how predictable is the revenue? Is it one-time revenue or recurring orders? Or even better: fixed subscriptions?
- Entrepreneur dependency: how decisive is the current owner to the success of the business?
In practice, the value of a business is often expressed in a simple formula as a factor x gross profit. In SMEs, that factor, also called multiple, averages between 4 and 6 times gross profit.
So suppose: the target business has an average gross profit of 200,000 euros. Then the indicative business value, depending on the sector in which the business operates, is between 800,000 and 1,200,000 euros.
To arrive at a more accurate valuation, a few more specific risk factors are applied to the value of this indicative range. In addition to the owner dependence and revenue composition mentioned above, these are:
- Dependence on 1 or 2 large customers
- Dependence on 1 or 2 large suppliers
- Market position and reputation
- Spread of entrepreneurial activities
- Barriers to entry for new competitors
What is the difference between a business’s value and its price?
Important to know: value and price are two different concepts. Waarde is the outcome of a calculation and is usually the starting point for negotiations. Price is what you as the buyer will ultimately pay for the business.
To reach a deal, the buyer will often pay a little more and the seller will have to be willing to "water down. Several factors play a role in this game, such as the buyer's financial position, competition from other buyers, financing options. Last but not least, emotion: how badly does the buyer want and how badly does the seller want?
How can you quickly get an estimate of a business’s value?
In the Brookz Takeover Barometer, we publish the average multiples for 12 sectors every six months. Want a quick estimate of a business’s value? Find the multiple for the sector in which the business operates and multiply that number by the gross profit. It’s important to note that you should always subtract a business’s debt from this indicative value.
5. Arranging funding
If you and the seller intend to reach a deal, it's time to arrange (or preferably before) de financiering of the purchase. These days, this is often done through a "stack financing.
Currently, banks are willing to finance a maximum of 50 percent of the total acquisition sum. So the other half will have to come from your own resources and other sources of financing. It is very important that you have a picture of your financial picture as early as possible in the buying process. It is a waste of time and energy if you spend months in talks with a seller, only to find out in the final stage that you cannot close the deal because of the financing.
This means that, in practice, a mix of financing sources is needed - it is sometimes referred to as stack financing - to finance the acquisition.
Personal Funds
You can’t avoid putting in your own money. After all, if you aren’t willing to take risks yourself, why would a bank or investor be willing to do so? Financiers therefore expect commitment, and they want you to share in the pain if the business doesn’t do well.
Bank Loan
The most obvious method of financing is a bank loan. A major advantage of the bank is that you keep full ownership of the shares, so you do not give away control. In addition, a bank loan is cheaper than capital from an investment business, which has much higher return requirements.
Subordinated Loan
This refers to a loan (often provided by the seller in the form of a vendor loan) in which, in the event of bankruptcy, the creditor is subordinated to other creditors, such as the bank and other creditors. To compensate for that risk, a higher interest rate is usually stipulated.
Earn-out
An earn-out involves making part of the purchase price dependent on the company's future profits or revenue. For example, the buyer pays 1.5 million euros immediately and another three tons if profits reach a certain level. If profits are lower, the additional amount is forfeited or paid pro rata. This arrangement is used in particular if the seller has far too rosy expectations about the future in the eyes of the buyer. He is only willing to pay for these expectations if they come true.
Investor(s).
Unlike financiers, investors do not provide debt capital, but mainly equity and subordinated loans. As a result, they also become co-shareholders. Investors, by the way, offer more than just money. They often have a large network and knowledge of the market, which you as a buyer can take advantage of.
In addition to "classic" structures such as a subordinated loan or earn-out, there are more ways to get a deal done with the help of the seller. Increasingly, a partial transfer of shares takes place because otherwise the financing will not be completed. Initially, for example, 60 percent is purchased. The remainder is then transferred to the buyer in phases in the following years.
6. Negotiate
You have vetted the target business and are in the process of arranging financing. Now it's a matter of reaching a good deal through negotiation with the seller.
By now, you should have done your homework and verified, through due diligence, that all of the seller’s figures and claims are accurate.
The next step consists of signing a letter of intent with a non-binding offer on your part. Important points to be included in it are the purchase price, deal structure and important guarantees. It is obvious that you don't just go into negotiations. There are a number of things you need to think about beforehand:
Determine Your Limit
What is the maximum amount you’re willing to pay for the business? This prevents you from making irresponsibly high offers—even if you fall in love with the business.
Set Your Goals
What are you willing to negotiate? And what are you not willing to negotiate? Consider the purchase price and warranties, but also a consulting agreement for the seller, retaining staff, and keeping family members on the payroll. Also, think about what is absolutely non-negotiable.
Warranties and indemnities
In addition to the price and payment terms, warranties and indemnities are the most important points of contention during negotiations. These warranties and indemnities are intended to protect you against all kinds of risks and claims arising from the past.
Be prepared to call off the sale
Make sure you never become dependent on the deal. Always be prepared to walk away from negotiations; otherwise, your position will weaken. It’s better to walk away than to accept a bad deal.
Show respect for the owner
An important aspect of interacting with the business owner is working to build a good relationship from the very first meeting. Show respect and earn their trust, because ultimately, they have to be willing to sell to you. Also, don’t be too eager to publicize your plans. Doing so implicitly criticizes the previous owner, which will only turn him against you.
7. Complete the deal
You have reached an agreement with the seller and the signatures have been signed. That means you are ready to transfer.
Once the negotiations have been successfully completed and you have secured financing, it is time to sign the final sales contract at the notary. This is also called the closing.
The purchase agreement contains the purchase price, payment terms and any other agreements you have made with the seller. By the way, signing the purchase agreement does not settle the share transfer. This requires a notarial deed of transfer. Only after passing this deed of transfer will you be the new owner of the shares (and the business).
Share transaction
The delivery of shares does not take place until the seller has certainty about receiving the purchase price. The notary sees to this. On the day of delivery, the buyer deposits the purchase price into the notary's escrow account. Before the notary proceeds with delivery, he calls the bank to ask if the money has indeed arrived.
Asset/Liability Transaction
In an asset/liability transaction, a visit to the notary is not required; after all, no transfer of shares takes place. However, because such transactions often involve large sums of money, a notary is usually engaged anyway. The notary is then primarily responsible for ensuring that the flow of funds proceeds smoothly.
By far the majority of business transfers in the SME sector involve share transactions. The main reason is that the seller makes this a non-negotiable requirement. A seller who is patient or whose business is in high demand can certainly afford to take this stance. In addition, after weighing the pros and cons, buyers aren’t always up for the hassle involved in an asset transaction.
Once all the signatures are in place, it’s time to congratulate each other and pop the champagne!
Frequently Asked Questions About Buying a Business
What are the most important steps in buying a business?
You’ll go through seven steps: creating a buyer profile, finding businesses, evaluating businesses, determining the value and price, arranging financing, negotiating with the seller, and closing the deal at the notary’s office. A well-defined buyer profile and thorough evaluation increase your chances of buying a business that’s truly the right fit for you.
How do you calculate an indicative business value when buying a business?
The value of a small or medium-sized business is often expressed as a multiple of gross profit, with an average multiple ranging from 4 to 6 times gross profit. With a gross profit of 200,000 euros, that means an indicative enterprise value between 800,000 and 1,200,000 euros, from which you must still subtract the business’s debts.
What percentage of a business acquisition does a bank finance?
Banks are currently willing to finance up to 50% of the total acquisition price. The other half must come from your own funds and other sources of financing, such as a subordinated loan, an earn-out, or an investor—a combination also known as stacked financing.
What is an earn-out in a business acquisition?
In an earn-out arrangement, a portion of the purchase price is contingent on the business’s future profits or revenue. For example, the buyer pays 1.5 million euros up front and an additional three hundred thousand if profits reach a certain level; if profits are lower, the additional amount is forfeited or paid on a pro-rata basis.
Do Acquired Small and Medium-Sized Businesses Perform Better After an Acquisition?
Research shows that as many as 70% of acquired small and medium-sized businesses perform better after the acquisition than they did before. Buying a business often involves less risk than starting one from scratch, because the products, customers, and suppliers are already in place.
What is the difference between a stock transaction and an asset/liability transaction in an acquisition?
In a share transaction, the transfer of shares only becomes final after the notarial deed of transfer has been executed, and this is by far the most common form of transaction among small and medium-sized enterprises (SMEs). In an asset/liability transaction, a visit to the notary is not required because no shares are being transferred, although a notary is often engaged to oversee the cash flows.
